By Ibon Villelabeitia
ANKARA, May 15 (Reuters) - Turkey’s 25-year separatist conflict in the impoverished mainly Kurdish southeast has long been a source of regional instability and a hindrance to Ankara’s European Union membership quest.
Military operations against Kurdistan Workers’ Party (PKK) guerrillas based in northern Iraq have weakened the group and Prime Minister Tayyip Erdogan’s government has expanded cultural and political rights to minority Kurds.
Some observers say the Kurdish problem might be nearing an end but warn that important sticking points lie ahead.
Here are possible scenarios for Turkey’s southeast.
MILITARY DEFEATS PKK?
* With U.S. intelligence, the military conducts regular air strikes on rebel targets in the mountains of northern Iraq since it launched a border incursion in February 2008. The PKK, believed to number up to 4,000 fighters, has lost many of its bases in northern Iraq and in southeast Turkey. The capture of its leader Abdullah Ocalan in 1999 dealt a blow to the group, set up in 1984 to create an ethnic homeland in the southeast.
* Although the PKK is not seen as a serious security threat to Turkey, it is capable of launching guerrilla-style attacks such as the one that killed 17 soldiers in October on a military outpost. The group uses roadside bombs as a common tactic. It has also been blamed for bomb attacks in Turkish cities.
* The presence of Kurdish guerrillas in mountainous areas in Iraq close to the borders with Turkey and Iran are an irritant in regional relations. This month Iraq condemned Iranian shelling of villages in Iraq’s Kurdistan region. Iran urged Iraq to pay special attention to armed groups in its border. Ankara has opened diplomatic channels with Kurdish authorities in Iraq.
* Despite the vast superiority of Turkey’s army -- NATO’s second largest -- commander General Ilker Basbug has said military might alone will not fix the Kurdish problem.
AMNESTY, LAYING DOWN WEAPONS?
* Turkey has rejected a general amnesty for PKK guerrillas, but has taken a more conciliatory tone towards finding a solution. Generals have said they would favour changes to legislation that would make it easier for PKK rank and file to "come down from the mountains". Amnesty is a highly emotional issue in Turkey. Military service is compulsory, meaning families are deeply affected by the death of any soldier, referred to as "martyrs" by media. In formulating any possible amnesty, the government would need to be careful not to spark a backlash from nationalist parties and public opinion.
* Murat Karayilan, a senior commander of the PKK, said in an interview published last week the PKK no longer sought an independent Kurdish state, but recognition of Kurdish rights and ethnic identity. Karayilan did not rule out laying down arms but said a modality needed to be agreed upon. The group, branded a terrorist organisation by Washington and the European Union, has held ceasefires in the past but has rejected calls to disband.
* Poverty and unemployment as high as 50 percent in the southeast have contributed to providing a steady stream of PKK recruits, so a demobilisation programme would have to include a plan to boost the local economy, analysts say. In addition to the rebels, Village Guards, a rural militia set up by the state to protect villages against PKK, provide the livelihood for 500,000 people. With the economy heading for recession, funding for any demobilisation is a big challenge for the government.
MORE POLITICAL, CULTURAL RIGHTS?
* Although Turkey’s Kurds number 12-14 million out of a population of 70 million, the state for years did not recognise them as an ethnic group. Former President Kenan Evren, leader of a 1980 military coup, famously described Kurds as "mountain Turks" whose name came from the squelching noise their boots made when walking in the snow.
* Prime Minister Tayyip Erdogan was the first leader to admit the existence of a "Kurdish problem" in Turkey. Under reforms aimed at gaining membership of the EU, the ruling AK Party has given Kurds more cultural and political rights, including launching a Kurdish state television station. Such steps are also designed to erode popular support for the PKK.
* Kurdish politicians say more needs to be done. Kurdish is banned in courts and in political speeches. The use of letters "q", "w" and "x" -- used in Kurdish but not in Turkish -- is prohibited in official correspondence. Thousands of villages in the southeast have been renamed. Erdogan refuses to shake hands with members of the Democratic Society Party (DTP), Turkey’s only legal Kurdish party, despite the fact DTP leader Ahmet Turk met U.S. President Barack Obama in Ankara last month.
* Analysts say massive government investment is needed in the southeast, where per capita income in some rural areas is a fifth of that in Istanbul and in the more industrialised parts of wealthier western Turkey. A multi-billion dollar programme known as GAP to modernise the region through agriculture and irrigation has failed to meet needs.
* The threat of violence and sabotage paired with a poorly trained workforce and bad communications in an isolated region that borders Iran, Iraq and Syria have long deterred foreign and national investors from setting up textile and auto factories such as the ones that exist in other parts of the country.
* Potential for mining has also been crippled by violence. (Writing by Ibon Villelabeitia; Editing by Jon Boyle)